“Bridgeline acquired new customers in the banking and healthcare industries this quarter and also saw sales to its existing customer base for its newest product, Unbound Insights,” said Ari Kahn, Bridgeline’s President and Chief Executive Officer. “Bridgeline’s customers utilize us as a strategic Marketing Technology advisor with great interest in our new products, like Unbound Insights, and recommendations for third party tools to add to their website. Innovation, partnership and possible acquisitions of new technologies are opportunities for Bridgeline to build upon relationships with customers and cross-sell into new customer bases while leveraging our infrastructure for increased gross margins on new technologies. We are hopeful such strategic opportunities can increase SaaS revenues in an accretive way and create material growth opportunities for the Company.”

Third Quarter Summary:

SaaS revenue was $1.1 million in the third quarter of fiscal 2018, compared to $1.4 million in the third quarter of fiscal 2017.

Hosting revenue was $243,000 in the third quarter of fiscal 2018, compared to $242,000 in the third quarter of fiscal 2017.

Recurring revenue was $1.5 million in the third quarter of fiscal 2018, compared to $1.8 million in the third quarter of fiscal 2017.

Subscription and perpetual license revenue was $1.3 million in the third quarter of fiscal 2018, compared to $1.7 million in the third quarter of fiscal 2017.

Operating expenses (excluding a goodwill impairment charge of $4.6 million) were reduced by $441,000, or 17.2% to $2.1 million in the third quarter of fiscal 2018, from $2.6 million in the third quarter of fiscal 2017.

Year to Date Summary:

SaaS revenue was $3.9 million in the first nine months of fiscal 2018, compared to $4.2 million in the first nine months of fiscal 2017.

Hosting revenue increased 12.9% to $839,000 in the first nine months of fiscal 2018, compared to $743,000 in the first nine months of fiscal 2017.

Recurring revenue was $5.1 million in the first nine months of fiscal 2018, compared to $5.3 million in the first nine months of fiscal 2017.

Subscription and perpetual license revenue was $4.4 million in the first nine months of fiscal 2018, compared to $5.0 million in the first nine months of fiscal 2017.

Operating expenses (excluding a goodwill impairment charge of $4.6 million) were reduced by $1.0 million, or 13.0% to $6.9 million in the first nine months of fiscal 2018, from $7.9 million in the first nine months of fiscal 2017.

Financial Results

Third Quarter

Revenue for the third quarter of fiscal 2018 was $3.1 million, compared to $4.1 million in the third quarter of fiscal 2017. SaaS revenue was $1.1 million in the third quarter of fiscal 2018, compared to $1.4 million in the third quarter of fiscal 2017. Hosting revenue was $243,000 in the third quarter of fiscal 2018, compared to $242,000 in the third quarter of fiscal 2017. Recurring revenue was $1.5 million in the third quarter of fiscal 2018, compared to $1.8 million in the third quarter of fiscal 2017. Subscription and perpetual license revenue was $1.3 million in the third quarter of fiscal 2018, compared to $1.7 million in the third quarter of fiscal 2017.

Operating expenses (excluding goodwill impairment charge of $4.6 million) were reduced by $441,000, or 17.2% to $2.1 million in the third quarter of fiscal 2018, compared to $2.6 million in the third quarter of fiscal 2017, reflecting management’s ongoing expense control initiatives. Loss from Operations was $5.2 million in the third quarter of fiscal 2018, compared to $323,000 in the third quarter of fiscal 2017. Included in the $5.2 million in the third quarter of fiscal 2018, is a goodwill impairment charge of $4.6 million.

Net loss, including a goodwill impairment charge of $4.6 million, was $5.2 million in the third quarter of fiscal 2018, compared to a net loss of $332,000 in the third quarter of fiscal 2017.

Adjusted EBITDA was a loss of $332,000 in the third quarter of fiscal 2018, compared to income of $49,000 in the third quarter of fiscal 2017.

Year to Date

Revenue for the first nine months of fiscal 2018 was $10.8 million, compared to $12.1 million in the first nine months of fiscal 2017. SaaS revenue was $3.9 million in the first nine months of fiscal 2018, compared to $4.2 million in the first nine months of fiscal 2017. Hosting revenue was $839,000 for the first nine months of fiscal 2018, compared to $743,000 in the first nine months of fiscal 2017. Recurring revenue was $5.1 million in the first nine months of fiscal 2018, compared to $5.3 million in the first nine months of fiscal 2017. Subscription and perpetual license revenue was $4.4 million in the first nine months of fiscal 2018, compared to $5.0 million in the first nine months of fiscal 2017.

Operating expenses (excluding a goodwill impairment charge of $4.6 million) were reduced by $1.0 million, or 13.0% to $6.9 million in the first nine months of fiscal 2018, compared to $7.9 million in the first nine months of fiscal 2017, reflecting management’s ongoing expense control initiatives. Loss from Operations was $6.1 million in the first nine months of fiscal 2018, compared to $1.1 million in the first nine months of fiscal 2017.

Net loss, including a goodwill impairment charge of $4.6 million, was $6.3 million in the first nine months of fiscal 2018, compared to a net loss of $1.3 million in the first nine months of fiscal 2017.

Adjusted EBITDA was a loss of $611,000 in the first nine months of fiscal 2018, compared to income of $81,000 in the first nine months of fiscal 2017.

Financial Outlook

For fiscal 2018, the Company expects revenue to be between $13.7 - $14.0 million for fiscal 2018, and management expects Adjusted EBITDA to be between negative $1.0 million and negative $800,000.

Conference Call Information

Bridgeline Digital will host a conference call to discuss third quarter 2018 results at 4:30 p.m. ET today. To listen to the conference call, please dial (877) 837-3910 within the U.S. or (973) 796-5077 for international callers.

Adjusted EBITDA and Adjusted EBITDA per diluted share are defined as earnings before interest, taxes, depreciation and amortization, stock-based compensation charges, restructuring charges, preferred stock dividends and any related tax effects. Bridgeline uses non-GAAP adjusted net income/(loss) and Adjusted EBITDA as supplemental measures of our performance that are not required by, or presented in accordance with, accounting principles generally accepted in the United States ("GAAP").

Bridgeline's management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company's financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, Bridgeline management presents non-GAAP financial measures in connection with GAAP results. Bridgeline urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which is included in this press release, and not to rely on any single financial measure to evaluate Bridgeline's financial performance.

Our definitions of non-GAAP adjusted net income/(loss) and Adjusted EBITDA may differ from and therefore may not be comparable with similarly titled measures used by other companies, thereby limiting their usefulness as comparative measures. As a result of the limitations that non-GAAP adjusted net income and Adjusted EBITDA have as an analytical tool, investors should not consider them in isolation, or as a substitute for analysis of our operating results as reported under GAAP.

All statements included in this press release, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," or similar expressions, and variations or negatives of these words. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions, including, but not limited to, the impact of the weakness in the U.S. and international economies on our business, our inability to manage our future growth effectively or profitably, fluctuations in our revenue and quarterly results, our license renewal rate, the impact of competition and our ability to maintain margins or market share, the limited market for our common stock, the volatility of the market price of our common stock, the ability to maintain our listing on the NASDAQ Capital market, the ability to raise capital, the performance of our products, our ability to respond to rapidly evolving technology and customer requirements, our ability to protect our proprietary technology, the security of our software, our dependence on our management team and key personnel, our ability to hire and retain future key personnel, or our ability to maintain an effective system of internal controls as well as other risks described in our filings with the Securities and Exchange Commission. Any of such risks could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. We expressly disclaim any obligation to update any forward-looking statement.